-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JYoARLL2pUFrTzwRYqUIkuxLwb99rJwVZgpL+MKQ0rY1QVJkVdXexUrYMOd54Z4B hGaZDu2PtfQzyaz0vrXDVQ== 0000897101-97-000017.txt : 19970115 0000897101-97-000017.hdr.sgml : 19970115 ACCESSION NUMBER: 0000897101-97-000017 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961130 FILED AS OF DATE: 19970114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CELOX LABORATORIES INC CENTRAL INDEX KEY: 0000883720 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 333384240 STATE OF INCORPORATION: MN FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-19866 FILM NUMBER: 97505266 BUSINESS ADDRESS: STREET 1: 856 SOUTH FIFTH ST CITY: HOPKINS STATE: MN ZIP: 55343 BUSINESS PHONE: 6129332616 MAIL ADDRESS: STREET 1: 856 S FIFTH STREET CITY: HOPKINS STATE: MN ZIP: 55343 FORMER COMPANY: FORMER CONFORMED NAME: CELOX CORPORATION DATE OF NAME CHANGE: 19930328 10QSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (X) Quarterly report under Section 13 of 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended NOVEMBER 30, 1996, or ( ) Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ____________ to ___________. Commission file number 0-19866 CELOX LABORATORIES, INC. (Exact name of small business issuer as specified in its charter) MINNESOTA 36-3384240 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 5959 BAKER ROAD, SUITE 320, MINNETONKA, MN 55345 (Address of principal executive offices) (Zip Code) Issuers telephone number, including area code: (612) 933-2616 Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the past 12 months (or for such shorter periods that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No ____ State the number of shares outstanding of each the issuer's classes of common equity, as of the latest practicable date. THE NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE, OUTSTANDING ON NOVEMBER 30, 1996 WAS 2,742,169. Transitional small business format disclosure: Yes ____ No __X__ Table of Contents CELOX LABORATORIES, INC. Report on Form 10-QSB for fiscal quarter ended November 30, 1996 PART I -- FINANCIAL INFORMATION Page ITEM 1. Financial Statements Balance Sheet as of August 31, 1996 and November 30, 1996 3 Statement of Operations -- Three month ended November 30, 1995 and 1996 5 Statement of Changes in Shareholders' Equity for the year ended August 31, 1996 and the three months ended November 30, 1996 6 Statement of Cash Flows -- Three months ended November 30, 1995 and 1996 7 Notes to Financial Statements 8 ITEM 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations 10 PART II -- OTHER INFORMATION 14 PART I -- FINANCIAL INFORMATION ITEM 1 -- FINANCIAL STATEMENTS CELOX LABORATORIES, INC. BALANCE SHEET November 30, August 31, ASSETS 1996 1996 ----------- ----------- CURRENT ASSETS Cash and cash equivalents $ 899,716 $ 420,222 Certificates of Deposit 490,005 968,663 Trade receivables 101,674 91,802 Investor settlement receivable -- current 0 57,328 Accrued interest receivable 7,510 19,002 Inventories 61,233 74,372 Prepaid expenses 7,348 814 ----------- ----------- Total current assets 1,567,486 1,632,203 ----------- ----------- INVESTOR SETTLEMENT RECEIVABLE 22,446 22,446 EQUIPMENT AND LEASEHOLD IMPROVEMENTS Laboratory and production equipment 204,882 204,882 Office furniture and equipment 78,764 78,764 Leasehold improvements 64,390 64,390 ----------- ----------- 348,036 348,036 Less accumulated depreciation (264,422) (254,432) ----------- ----------- 83,614 93,604 ----------- ----------- TOTAL ASSETS $ 1,673,546 $ 1,748,253 =========== =========== CELOX LABORATORIES, INC. BALANCE SHEET November 30, August 31, LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1996 ----------- ----------- CURRENT LIABILITIES Accounts payable $ 20,689 $ 29,748 Accrued liabilities 33,074 33,452 ----------- ----------- Total current liabilities 53,763 63,200 ----------- ----------- DEFERRED RENT 0 773 SHAREHOLDERS' EQUITY Common Stock 27,422 27,422 Additional contributed capital 5,251,756 5,251,756 ----------- ----------- 5,279,178 5,279,178 Accumulated deficit (3,659,395) (3,594,898) ----------- ----------- Total Shareholders' Equity 1,619,783 1,684,280 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,673,546 $ 1,748,253 =========== =========== See Notes to Financial Statements. CELOX LABORATORIES, INC. STATEMENT OF OPERATIONS - --------------------------------------- ----------- ----------- Three months ended November 30, 1996 1995 - --------------------------------------- ----------- ----------- REVENUES Net sales $ 85,705 $ 114,358 Cost of products sold 39,667 55,523 - --------------------------------------- ----------- ----------- GROSS MARGIN 46,038 58,835 - --------------------------------------- ----------- ----------- OPERATING EXPENSES Research and development 19,794 38,288 Marketing and sales 30,340 72,001 Administration 81,016 71,753 - --------------------------------------- ----------- ----------- Total operating expenses 131,150 182,042 OPERATING LOSS (85,112) (123,207) OTHER INCOME Interest and investment income 19,574 41,023 Other income 1,041 0 Investment gain 0 15,400 - --------------------------------------- ----------- ----------- Total other income 20,615 56,423 NET LOSS ($ 64,497) ($ 66,784) ======================================= =========== =========== LOSS PER COMMON SHARE ($ 0.02) ($ 0.02) ======================================= =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 2,742,169 2,742,169 ======================================= =========== =========== See Notes to Financial Statements.
CELOX LABORATORIES, INC. STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY - ----------------------------------------------------------------------------------------------------------------------------------- Additional Unrealized Common Stock Paid-in Accumulated Gain on Inv. Shares Amount Capital Deficit Avail. for Sale Total - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE AT AUGUST 31, 1994 2,764,669 $27,647 $5,268,681 ($2,864,260) 0 $2,432,068 Common stock repurchased (22,500) (225) (16,925) (17,150) Unrealized gains for the period 38,798 38,798 Net loss for the period (346,614) (346,614) - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE AT AUGUST 31, 1995 2,742,169 $27,422 $5,251,756 ($3,210,874) $38,798 $2,107,102 Net changes in unrealized gains for the year (38,798) (38,798) Net loss for the period (384,024) (384,024) - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE AT AUGUST 31, 1996 2,742,169 $27,422 $5,251,756 ($3,594,898) $0 $1,684,280 Net loss for the period (64,497) (64,497) - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE AT NOVEMBER 30, 1996 2,742,169 $27,422 $5,251,756 ($3,659,395) $0 $1,619,783 See Notes to Financial Statements.
CELOX LABORATORIES, INC. STATEMENT OF CASH FLOWS - -------------------------------------------------------------- ---------- ---------- Three months ended November 30, 1996 1995 - -------------------------------------------------------------- ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss for the period ($ 64,497) ($ 66,784) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 9,989 11,786 Deferred rent expense (773) (1,157) Changes in assets and liabilities: (Increase) decrease in: Accounts receivable (9,872) (37,923) Accrued interest receivable 11,491 (12,827) Inventories 13,139 (3,791) Prepaid expenses (6,534) 131 Increase (decrease) in: Accounts payable (9,059) 12,681 Accrued liabilities (377) 16,147 - -------------------------------------------------------------- --------- --------- Net cash used in operating activities (56,492) (81,737) - -------------------------------------------------------------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Maturity (Purchase) of bank certificates of deposit 478,658 (767,784) Proceeds from sale of short-term investments held for sale 0 230,100 Proceeds from investor settlement receivables 57,328 0 Purchase of equipment 0 (8,449) - -------------------------------------------------------------- --------- --------- Net cash from (used for) investing activities 535,986 (546,133) - -------------------------------------------------------------- --------- --------- Net increase (decrease) in cash and cash equivalents 479,494 (627,870) CASH AND CASH EQUIVALENTS: Beginning of period 420,222 919,404 - -------------------------------------------------------------- --------- --------- End of period $ 899,716 $ 291,534 ============================================================== ========= ========= See Notes to Financial Statements.
CELOX LABORATORIES, INC, NOTES TO FINANCIAL STATEMENTS -- NOVEMBER 30, 1996 NOTE A -- BASIS OF PRESENTATION The accompanying financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310 of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. The organization and business of the Company, accounting policies followed by the Company and other information are contained in the notes to the Company's financial statements filed as part of the Company's August 31, 1996 Form 10-KSB. This quarterly report should be read in connection with such annual report. NOTE B -- CASH AND CASH EQUIVALENTS For purposes of reporting the statements of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. NOTE C -- SHORT-TERM INVESTMENTS The Company had invested excess cash in the Piper Jaffray Institutional Government Income Portfolio Fund (Piper Fund). During the quarter ended February 29, 1996, the Company sold all remaining shares in this Fund. As an alternative to the Piper Fund, the Company has utilized Bank Certificates of Deposit. As of November 30, 1996 the Company had investments of $490,005 in Certificates of Deposit. Certificates of deposit are made only with the highest rated banks and less than $100,000 is deposited at any one bank. The Company also utilizes a money market fund, which is restricted by its charter to Tier 1 instruments, for a portion of its investments. NOTE D -- REPURCHASE OF COMMON STOCK Effective July 30, 1993, the Board of Directors authorized the repurchase of up to 300,000 shares of the Company's common stock in open market transactions at prices not to exceed $1.75 per share. At November 30, 1996 the Company had repurchased 136,700 shares at prices ranging from $0.85 to $1.58 per share. NOTE E -- LOSS PER COMMON SHARE Loss per share is computed based upon the weighted average number of common shares outstanding during the period. The Company has determined that under the modified treasury stock method, there would be no change in earnings per share due to outstanding common stock equivalents. Fully diluted and primary loss per share are the same amounts for each of the periods presented. NOTE F -- RECLASSIFICATION Certain 1996 amounts have been reclassified to conform with the 1997 presentation. These reclassifications had no effect on net income (loss) as previously reported. ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION Celox Laboratories, Inc. ("Celox" or the "Company") is a biotechnology company formed in 1985 that researches, develops, manufactures and markets cell biology products used in the propagation of cells derived from mammals, including humans, and other species. These specialized cell growth products are used primarily in academic, pharmaceutical, diagnostic and other commercial laboratories to improve the growth condition, productivity and quality of cell-derived medical and other biological products such as vaccines, monoclonal antibodies, interferons and human growth factor. The Company focuses primarily on solving the fundamental problems associated in culturing cells with the use of serum, which is derived from the whole blood of animals and humans. The Company's research activities have resulted in proprietary technology which has been used to commercialize its non-serum growth media, cell freezing solutions and other cell biology products. Celox currently manufactures and markets over 30 products. Celox's proprietary products consist of four serum replacement products, TCM, TM-235(TM), TCH(TM), and VaxMax(TM) and a cell freezing medium, Cellvation(TM). VaxMax(TM) was developed specifically for use in the production of veterinary vaccines. Celox also manufactures ten basal media formulations, a series of buffered salt solutions, other cell biology reagents and a variety of custom formulations. An additional proposed product, ViaStem(TM), continues to undergo further analysis in pre-clinical testing. This product was developed to improve the preservation of critical cells (e.g. stem cells) which are required for bone marrow transplantation. Other potential applications for ViaStem(TM) include the preservation of umbilical cord blood and platelets. Currently, Memorial Blood Centers of Minnesota and the University of Cincinnati's Hoxworth Blood Center will be providing additional pre-clinical data on ViaStem(TM). During the quarter ended November 30, 1996, the Company received notice from the United States Patent and Trademark Office (USPTO) that a patent for ViaStem(TM) would be issued in early December, 1996. The actual patent was received by the Company in the first week of December. The Company has also filed the documents needed for an International Patent Application as required by the Patent Cooperation Treaty. During February, 1996 the Company entered into an agreement with the Department of the Army, Walter Reed Army Institute of Research (WRAIR) that provides for a Cooperative Research and Development Agreement for Material Transfer which encompasses the Company's ViaStem(TM) product. The Company has received its first Drug Master File classification from the Food and Drug Administration (FDA) for TCM. This classification will expedite the FDA approval process for customers who want to use the Company's TCM product in the manufacture of drugs or drug substances for human use. The Company is in the process of gaining similar status for its other proprietary products. In April, 1994 the Company entered into an agreement with American Type Culture Collection (ATCC), Rockville, MD, the world's largest public archive of living biological cultures and genetic materials. ATCC serves the international scientific community by acquiring, preserving and distributing strains of the most diverse collection of organisms and derivative biological materials in the world. Under the agreement, ATCC will distribute cell lines adapted to the Company's non-serum products as well as other associated products worldwide. Orders for growth media under this agreement have continued during the current fiscal year. During July of 1995, the Company completed a non-exclusive world-wide distribution agreement with ICN Pharmaceuticals, Inc., Costa Mesa, CA. Under the agreement, ICN is marketing Celox's TCM, TCH(TM), TM-235(TM) serum replacement products as well as Cellvation(TM). Initial orders under this agreement were shipped in the last quarter of Fiscal 1995. Additional orders have been received during the first three months of this fiscal year. ICN manufactures and markets a broad range of prescription and over-the-counter pharmaceuticals, medical diagnostic products and biotechnology research products in North and Latin America, Eastern and Western Europe and the Pacific Rim countries. Beginning in fiscal 1997, the Company is providing its proprietary products to Sigma Chemical Company under a private label distribution agreement. The first shipment under this agreement occurred during the quarter ended November 30, 1996. RESULTS OF OPERATIONS The Company had recorded an Investor Settlement Receivable in the amount of $133,000 on the Balance Sheet in order to reflect the expected settlement proceeds from a class action lawsuit which was brought on behalf of investors in the Piper Fund. In December, 1995, the District Court Judge approved the Class action Settlement. Payments from the Piper Fund have been received in accordance with the schedule agreed upon in the settlement. As of November 30, 1996 the Investor Settlement Receivable is $22,446. A separate Class Action lawsuit against the Fund's auditors, KPMG Peat Marwick, has been certified by the Court. During the quarter ended November 30, 1996, the Company had net sales of $85,705 which was an decrease of $28,653 or 25% from $114,358 reported in the same quarter for the prior year. The decrease between years results from the timing of orders received from a large manufacturer as well as the timing of orders from distributors relative to the previous year. The Company had a net loss of $64,497 for the quarter ended November 30, 1996 compared to a net loss of $66,784 for the same period in the previous year. On a per share basis, the loss for the current quarter equalled 2 cents which is the same as the 2 cent loss in the previous year. The cost of products sold was 46% of net sales for the three months ended November 30, 1996, as compared to 49% of net sales for the three months ended November 30, 1995. The improvement between years is a combination of a greater level of sales of proprietary products, which have higher margins than standard formulations, and manufacturing labor, raw materials and other production costs have been consistently controlled. An operating loss of $85,112 was generated for the quarter ended November 30, 1996 compared to an operating loss of $123,207 for the same period in the previous year. The significant improvement between years is due in general to a decrease in research and development expenditures, lower marketing and sales expenses offset by higher administrative expenditures. The decrease in research and development expenses reflects the timing of expenses incurred in connection with the Company's ViaStemTM product. Future research and development expenses could be higher as clinical testing begins. The Company received interest and investment income of $19,574 during the quarter ended November 30, 1996 as compared to $41,023 in the prior year. Investment income is derived primarily from the investment of the proceeds of the Company's March 1992 initial public offering. The decrease in investment income during the quarter as compared to the previous year results from reduced investment balances as the Company uses capital in its operations as well as lower effective interest rates resulting from a transfer of amounts from the Piper Fund into bank certificates of deposit. Additionally, in the quarter ended November 30, 1995, the Company received special one-time dividends paid out from the Piper Fund. For the quarter ended November 30, 1996 the Company had no investment gains compared to an investment gain of $15,400 during the comparable period a year ago. In the prior year, a gain was realized when shares of the Piper Jaffray fund were sold. As was disclosed in previous sections of this Form 10-QSB, Piper Jaffray and the Class Action Plaintiffs have agreed to settle a lawsuit which was brought against the Piper Fund by investors. A lawsuit filed against the Fund's auditors, KPMG Peat Marwick, is still being pursued by investors other than the Company. The Company has not filed a lawsuit nor has it decided if it will join in any future class actions, but has not eliminated these options as a possibility in the future. Operating expenses decreased $50,892 (28%) to $131,150 from $182,042 for the quarters ended November 30, 1996 and November 30, 1995 respectively. The decrease as compared to the prior year is due to the timing and amount of research and development expenditures as well as reduced marketing and sales expenses offset by higher administrative expenditures. Research and development costs decreased by $18,494 to $19,794 from $38,288 in the current quarter as compared to the previous fiscal year. The decrease results from the timing of expenditures in the areas of salaries and wages and patent expenses incurred in connection with the ViaStemTM product. The Company expects the costs of research and development to fluctuate based on the status of pre-clinical and clinical trials for ViaStemTM. Marketing expenses decreased by $41,661 (58%) to $30,340 from $72,001 for the quarter ended November 30, 1996 compared to the quarter ended November 30, 1995. The decreases are attributable to the amount and timing of advertising, promotional materials and trade show expenses between years. The Company expects that marketing and sales expenses will increase during subsequent quarters as programs and advertising materials are developed. Administrative expenses increased by $9,263 (13%) for the quarter ended November 30, 1996 compared to the previous fiscal year to $81,016 from $71,753. The increase between years is primarily due to moving expenses incurred as part of the Company's move to a new facility. LIQUIDITY AND CAPITAL RESOURCES Capital resources on hand at November 30, 1996 include cash and short-term investments of $1,389,721 and net working capital of $1,513,723. This represents an increase of $836 (less than 1%) in cash and short-term investments and a decrease of $55,280 (3.5%) in net working capital as compared to August 31, 1996. The lease for the Company's facilities terminated in October, 1996. A new facility is currently being constructed in Oakdale, Minnesota, a suburb of St. Paul. The Company will lease approximately 9,500 square feet of office laboratory and warehouse space in this facility. The Company expects to move into the Oakdale facility during February, 1997. In the interim, the Company has leased office and warehouse space on a month-to-month basis. The Company anticipates spending approximately $175,000 in fiscal 1997 on capital expenditures. Through November 30, 1996 the Company has not made any capital expenditures. The majority of the planned expenditures will be used to fund additional sales, research and development, manufacturing growth and specialized tenant improvements. It is anticipated that the tenant improvements will be financed through a local financial institution. The Company believes that its capital resources on hand at November 30, 1996, together with revenues from product sales, will be sufficient to meet its cash requirements for the near future. PART II -- OTHER INFORMATION ITEM I -- LEGAL PROCEDINGS The Company is a member of the class in the KPMG Peat Marwick action as it relates to their audit of the Piper Jaffray Institutional Government Income Portfolio Fund, on whose behalf litigation has been commenced in federal district court in Minneapolis. the Company has not directly participated in the litigation and the Company does not believe any material developments in the status of the litigation occurred during the quarter which is the subject of this report. The Company is a defendant in a wrongful termination lawsuit brought by a former employee who was in the probationary period at the time of the termination. The Company believes that the lawsuit is without merit. However, it has participated in an arbitration hearing in order to bring closure to this lawsuit. As of December 31, 1996, a final settlement document still has not been executed. ITEM 2 -- CHANGES IN SECURITIES None ITEM 3 -- DEFAULTS UPON SENIOR SECURITIES None ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5 -- OTHER INFORMATION None ITEM 6 -- (A) EXHIBITS Exhibit 27 - Financial Data Schedule (B) REPORTS ON FORM 8-K On September 26, 1996, the Company filed a Form 8-K that reported that the NASDAQ Stock Market delisted Celox Laboratories, Inc. for failing to meet an exchange requirement of maintaining net tangible assets of at least $2,000,000. SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CELOX LABORATORIES, INC. Dated: January 13, 1997 By: /S/ Milo R. Polovina ----------------------------------- Milo R. Polovina, President & Principal Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 0000883720 CELOX LABORATORIES, INC. 3-MOS AUG-31-1997 NOV-30-1996 899,716 490,005 101,674 0 61,233 1,567,486 348,036 264,422 1,673,546 53,763 0 0 0 27,422 1,592,361 1,673,546 85,705 85,705 39,667 120,683 0 0 0 (64,497) 0 (64,497) 0 0 0 (64,497) (0.02) (0.02)
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